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Protection Claims 2015 QA

  1. What are each of the “protection” products in this data?
  2. - Life insurance is a pre-determined cash lump sum on death, during the term of the policy (term insurance) or wherever death occurs (Whole life)

    - Critical Illness insurance pays out a lump sum when an illness like cancer, heart attack and stroke meets a certain degree of severity

     - Terminal Illness insurance is an ‘advance’ payment under a term life policy, where death is expected - within 12 months and the illness either has no known cure or has progressed to the point where medical advisersbelieve it cannot be cured

     - Income Protection (IP) insurance will pay an income if the policy-holder is unable to carry out their job due to illness or injury and it results in a loss of income. 

    - A Total Permanent Disability claim would be met when physical or mental ability, through an illness or injury (usually before a set age) results in the insured person being unable to perform the duties of their occupation ever again or indeed being able to complete certain everyday tasks. Crucially, the relevant specialist will assess if the disability will last for rest of the insured person’s life, with no prospect of improvement.

  3. Why is the ABI publishing claims data on protection insurance?
    The ABI is committed to helping consumers make informed decisions about which protection insurance product is right for them and how to prevent having a claim declined. A very high percentage of protection insurance claims are paid. The ABI’s commitment to transparency should help consumers and advisers understand why a small percentage of claims are not paid and how they can avoid their claims being declined.
  4. How much in total was paid out in protection claims in 2015?
    The table below details claims by different individual protection products. Overall, £3.6 billion was paid out in protection claims in 2015, which means that every day, insurers paid out more £10m to help individuals and their families cope with the financial strains and worries that can be caused by a life changing event.
  5. Type of Product Number of Claims Total value paid (£000) Average Claim Paid in (£s)
    Received Paid % Paid Declined % Declined
    Term Life Insurance 29,248 28,734 98.2% 514 1.8% 1,545,616 53,790
    Terminal Illness 4,022 3,740 93% 282 7% 375,645 100,440
    Critical Illness 18,307 17,045 93.1% 1,262 6.9% 1,128,140 66,186
    Total Permanent Disability 875 581 66.4% 294 33.6% 37,889 65,213
    Whole of Life 65,672 65,664 99.9% 8 0.01% 389,080 5,925
    Individual Income Protection1 14,664 13,372 91.2% 1,292 8.8% 131,026 9,799*
    Total claims 132,788 129,136 97.2% 3,652 2.8% 3,607,396 27,935

    Note: Claims paid includes those that were in payment at the start of the year and new claims where a decision was made during the year.

  6. How does the ABI’s data collection work and what percentage of the market does this data cover?
    The ABI has collected data from insurers on individual protection products using a standard definition and measure for each type of data collected. This has ensured consistency in the data reported to the ABI.
  7. How does this data for 2015 compare to ABI data published in previous years?
    Insurers are in business to pay claims, so we expect the percentage of claims paid to stay around this number, although it may fluctuate slightly year to year. In 2015, the percentage of total claims that have been paid out for individual protection products has decreased slightly from 97.7% to 97.2%.
  8. Are the number of successful claims for Critical Illness insurance rising?
    Yes, this year’s figures illustrate that the number of Critical Illness insurance claims being paid has risen. The percentage of claims paid is 93.1% in 2015, an increase from 92% the previous year. This has increased considerably since 2005 when it was 80%. This increase is largely due to the ABI’s Code of Practice on non-disclosure which was first issued in 2008. This document clarified which medical information customers needed to share with insurers and how insurers would treat non-disclosure (also known as misrepresentation) when a claim is made. This clarification has led to a marked increase of claims being paid rather than declined.
  9. Why was a disproportionate number of Total Permanent Disability claims declined?
    Before the ABI introduced the standard definition for Total Permanent Disability (TPD) in the Statement of Best Practice for Critical Illness in 2011 there was no standard definition of what circumstances qualified as “total permanent disability”. This lack of clarity led to claims being made that did not qualify in the policy terms. The introduction of a standard definition has meant that the number of declined claims has steadily fallen; this trend will continue as all new TPD policies are tested against the industry standard set by the ABI, but for the time being there are still some ‘older style’ policies in force.
  10. Are there single industry definitions of Critical Illness conditions or does each ABI member use their own?
    It is mandatory for ABI members who sell new Critical Illness policies to sign up to the ABI Statement of Best Practice for Critical Illness insurance which sets out the minimum definitions for the majority of conditions.
  11. What are some of the most common reasons for claims to be declined?
    Insurers are in business to pay claims, not to decline them. 97.2% of all individual protection claims in 2015 were paid, while just 2.8% were declined. When claims are declined this is usually due to the customer not disclosing important information when taking out the policy, or claiming for a condition that is not covered by the policy. As with all insurance products, it is important that customers answer questions fully and accurately, as this will minimise delay or problems if a claim needs to be made. It is important for customers to speak to their insurer if they are unsure what a policy will cover them for.
  12. Why does the ABI not publish Group Income Protection figures?
    Aggregate industry Group protection claims data are collected and published by Group Risk Development (GRiD). Group protection is bought by employers to provide support to them and their employees.

Last updated 01/07/2016